What is a APY?
Quick Definition
APY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Full Definition
APY is the most common way to express the return on a financial product. By factoring in compounding, the effect of earning returns on previously earned returns, APY provides a more accurate picture of actual annual return than simple interest rates. It's used across savings accounts, money market funds, bonds, and digital asset products to allow apples-to-apples comparisons.
How to read an APY figure
APY is typically variable and can change over time based on market conditions, the performance of underlying assets, or changes in protocol parameters. Some products advertise a fixed APY, but most reflect market dynamics. When evaluating any APY figure, the key questions are: What underlying assets generate the return? How is it calculated? Is it variable or fixed? What risks are involved?
If an asset offers a 10% APY, an investment of $1,000,000 would generate approximately $100,000 in returns over one year, assuming the APY remains constant throughout that period.
Steady's APY
Steady's APY reflects the performance of our underlying reserve assets, primarily short-term US Treasury Bills. T-Bills have historically offered an average return of around 3–5% APY, though actual performance will vary with market conditions.
Because Steady's model reflects the actual performance of these underlying assets, we cannot guarantee a fixed APY. However, the current APY is always available in real time on the Transparency Portal.
Related Terms
Reserve Assets
ReadReserve assets are the specific financial instruments held by a stablecoin issuer to back the tokens in circulation.
Treasury Bills (T-Bills)
ReadTreasury Bills (T-Bills) are short-term debt instruments issued by the US government, typically maturing in one year or less.
Yield
ReadYield refers to the income or return generated from an asset over time, usually expressed as a percentage of the asset's value.
Yield-bearing Stablecoin
ReadA yield-bearing stablecoin is a stablecoin that generates a return for its holders, typically derived from the performance of its underlying reserve assets.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
Counterparty Exposure
ReadCounterparty exposure refers to the risk that another party, such as a bank, custodian, broker, or service provider fails to fulfill its obligations, potentially affecting the assets or funds it holds.
LearnMoreAboutSteady
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FAQs
Discover the basics about Steady in our frequently asked questions.
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